Tiger Airways raises stake in SEAir

Budget carrier Tiger Airways has revised contractual obligations to acquire a 40% stake in the Philippines’ South East Asia Airlines for US$7 million instead of the original 32.5% stake for US$6 million.

Most analysts view this as a positive development for Tiger, which has suffered much last year when the Civil Aviation Safety Authority of Australia suspended its Australian operations because of safety infringement. Clearly, the strategy for most carriers in the region is to set up multiple joint-ventures to cover a wider area of bases as the competition intensifies to take advantage of more liberal aviation policies that have been long overdue.

Consider Qantas in its joint ventures separately with Japan Airlines, Vietnam Airlines and China Southern Airlines through its Jetstar budget arm, and AirAsia that is staking claims in Thailand, Indonesia and Japan. Tiger too has acquired a 33% stake in Indonesia’s Mandala Airlines. However, two previous initiatives to be based in South Korea and Thailand failed.

Tiger can certainly make good use of the joint-venture to utilize current excess capacity, and particularly so in light of new aircraft deliveries. While the industry has always held the belief that capacity will generate demand, it is however not really the best of times against the background of a sluggish economy and the high costs of jet fuel. Tiger may well have considered the lesser of two evils, that by raising its stake in the Philippines carrier, it is hoping to recover the debt owed by SEAir.

In the bigger picture, Tiger’s best hope is the long term – in fact, not too far away – when Asean skies become fully liberalized in 2015, that is, if it finally happens.

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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